This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

JPMorgan Boosts Litigation Reserve by $7.2B, Wiping Out 3Q Profit

Stocks in this article: JPM

NEW YORK (TheStreet) -- JPMorgan (JPM - Get Report) is boosting its litigation reserve by $7.2 billion after taxes, as the nation's largest bank by assets braces for a set of costly legal settlements with regulators on activities the bank and its acquired units such as Washington Mutual and Bear Stearns made during the housing boom.

JPMorgan's multi-billion dollar addition to its legal reserve wiped out the firm's third-quarter profit and signals that CEO Jamie Dimon may be working on a settlement to resolve most of the outstanding legal liabilities of the bank.

JPMorgan said in a presentation appended to its earnings that since 2010 it has added $28 billion to its legal reserves, offset by a $8 billion reduction attributable to settlements and legal judgments. Overall, reserves for litigation have cost the bank approximately $23 billion in net income over that time span.

JPMorgan reported a third-quarter loss of $400 million, or 17 cents a share, on revenue of $23.9 billion. That loss was attributable to $9.15 billion in pretax expense and $7.2 billion in after-tax expense related to a rising provision for the bank's legal expense. The bank, however, also said results included a $1.6 billion pretax benefit from reduced reserves to its consumer and community banking business.

Excluding those one-time items, JPMorgan reported $5.8 billion in net income, or $1.42 in earnings per share, which beat bottom-line profitability estimates of $1.30. The bank's $23.9 billion in revenue fell slightly short of consensus Wall Street forecasts closer to $24 billion, according to Bloomberg data.

"While we had strong underlying performance across the businesses, unfortunately, the quarter was marred by large legal expense. We continuously evaluate our legal reserves, but in this highly charged and unpredictable environment, with escalating demands and penalties from multiple government agencies, we thought it was prudent to significantly strengthen them," Dimon said in a statement.

"The board continues to seek a fair and reasonable settlement with the government on mortgage-related issues - and one that recognizes the extraordinary circumstances of the Bear Stearns and Washington Mutual transactions, which were undertaken at the request or encouragement of the U.S. Government," Dimon added, of the bank's most pressing outstanding legal items.

He warned that litigation costs could be volatile over the next several quarters, but that the expense will abate over time.

JPMorgan shares were gaining about 1.5% in premarket trading to $53.30 following the firm's earnings announcement.

-- Written by Antoine Gara in New York.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs